New Delhi:
The wholesale credit book of non-banking finance companies and housing finance companies that includes real estate and infrastructure lending is likely to grow at 21 per cent annually till 2020, according to a report.
"The wholesale credit book of non-banks comprising real estate lending, infrastructure finance and structured credit is seen growing at a pace of 21 per cent annually till 2020, or 350-400 basis points faster than the retail and MSME (micro, small and medium enterprises) segments," the report by rating agency Crisil states.
Robust controls have kept the asset quality in the segment stable despite an increase in infrastructure loan delinquencies, Crisil states. With this, the share of wholesale credit in non-banks' overall credit pie would surge to nearly 20 per cent from just 12 per cent in 2014, it states.
Going by the report, growth in real estate financing would be driven by pent-up demand in affordable housing and rising ticket sizes stemming from funding consolidation. Real estate financing constitutes over half of the wholesale credit book.
"As banks remain cautious in this space, non-banks have stepped in, aggregating exposure across projects in different stages of completion," the report states. Non-banks include NBFCs and HFCs and excludes government-owned non-banks. Crisil expects infrastructure financing, which accounts for roughly a quarter of the wholesale credit portfolio of non-banks, to benefit from government spending.
The report, however, said the wholesale credit segment has challenges due to high concentration risk with the top 10 accounts of a typical non-bank operating in the infrastructure space, comprising 25-30 per cent of its advances, which can cause volatility in asset quality.
Most non-banks have managed risks better, backed by stringent controls, according to Crisil's senior director Krishnan Sitaraman.
"The security structure is robust, with high degree of operational control over escrow cash flows, specifically in real estate exposures. The collateral cover in structured loans tends to be high at about 2.5 times on average," Sitaraman said.
As on March 31, 2018, gross NPAs in the wholesale segment stand at nearly 2.5 per cent, significantly better than that for the banking sector, the agency adds.
(With inputs from agencies)
